Wednesday's Market Minute: Bitcoin's Ultimatum Approaches
If bitcoin doesn’t rally if and when stocks are under pressure due to inflationary worries, it will likely set off an excruciating downtrend as king crypto’s mythos unravels and people come to terms with what it’s likely been about all along: selling to the next guy. A lot of people have infamously written “bitcoin is dead” articles. Not me. I’ve written about why most people don't need bitcoin, about why the evidence is overwhelming that bitcoin trades as a speculative asset, but I’ve always left room for the possibility of the seemingly impossible: that bitcoin will one day make a miraculous metamorphosis from a get-rich-quick trade to an inflationary hedge. Evidence such a day will come is paltry, and the clock is ticking. I’ve always maintained the most positive thing for bitcoin would be if it rallies during a stock selloff. Apart from a brief moment in October last year, it’s never happened, and right now is when it counts.
Bitcoin’s been billed by its biggest proponents as a store of value in a hyperinflationary environment produced by excessive stimulus from policymakers. Right now, investors’ biggest concern is inflation produced by excessive stimulus from policymakers, and growth stocks are paying the price for it. If an inflation-driven selloff gets more serious and bitcoin drops too, its façade will erode quickly. Bitcoin has utility in its role as a censorship-resistant means of money transfer, but many cryptos can accomplish this goal. It's the gold story that's been the secret to its success. "Digital gold" is the easiest catchphrase to remember, repeat, and fits with the financial narrative du jour of the money-printing generation. But most importantly, it’s been the most successful story because it’s been impossible to disprove – up until now.
This is the moment everyone’s been waiting for. We just had the biggest bond selloff in history a few months ago and the dollar is in a month-long freefall. The prospect of inflation is causing unstoppable momentum stocks of the past decade to stall out. Bitcoiners have never been more convinced that destiny is manifest, and many believe crypto canon calls for an extension of gains after last year’s block “halving.” Gold is finally rallying, but bitcoin’s hit a wall. If it sells off here, the entire story falls apart.
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